THE IEA’S
NET-ZERO 2050
The new normal and what’s
left to be doneTABLE OF CONTENTS
THE IEA’S NET-ZERO 2050

The new normal and what’s left to be done
Author:Paul Schreiber

Executive summary

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Recommendations

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Introduction - The NZE: setting the new normal

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Box 1 - IEA’s WEO 2021 scenarios
Box 2 – The benefits of the NZE trajectory

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1. The new normal for fossil fuels

Contributors:

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a. Ending fossil fuel development
Box 3 - No new fossil fuel supply investment: what does the IEA mean?
b. Drastically cutting methane emissions
Box 4 – Dirty energy vulnerable to physical risks

Paddy McCully
Lucie Pinson

Publication date:
December 2021

Reclaim Finance would especially like to thank Kelly Trout and David Tong
from Oil Change International and Kingsmill Bonds from Carbon Tracker for
their comments and suggestions.

2. The old fossil fuel habit die hard

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a. The carbon capture and removal trick to preserve fossil fuels
Box 5 – The Production and coal gaps
b. Fossil fuel investments still unaligned
Box 6 – The CCS illusion
Box 7 – Energy Return on Investment: an increasingly bad business?

3. Did you say “low carbon”?

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28
30
32
35

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a. The biomass risky gamble
b. Renewable energy: the key to the transition
Box 8 – Critical minerals: no crisis in sightc. Nuclear at a crossroad
Box 9 – Fossil fuel subsidies still going strong

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40
46
48
50

Conclusion – After WEO 2021

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Box 10 - The One Earth Climate Model (OECM) sectoral pathways
Box 11 – Eternal growth?

Annex

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EXECUTIVE SUMMARYT

he World Energy Outlook (WEO) 2021
was intended to be the International
Energy Agency’s (IEA) “guidebook” to
COP26. Published just weeks before theclimate gathering, it centered the IEA’s “Net
Zero by 2050” (NZE) scenario and highlighted
the gaps between this 1.5°C trajectory
and the current international and national
pledges and policies.

if the fossil fuel production trends of the NZE
were to be aligned with the UN Production
Gap Report.
While oil and gas investment have significantly
fallen in 2020 and 2021 as the result of theCovid crisis, the level of fossil fuel investmentin the NZE from 2021 to 2030 - and even more
so after 2030 - represents only a fraction of
the investment in the sector made in thelast decade. More importantly, oil and gas
companies are still heavily investing in new
supply projects that are incompatible with
the NZE. As the IEA underlines, investments
must urgently be redirected from fossilheavy activities to clean alternatives if weare to meet NZE goals that require “a surge
in global energy investment to $5 trillion by
2030, with 85% of spending directed to clean
energy”. Most of this funding will come fromthe private sector, underlining the need forfinancial players to step away from fossil fueldevelopers and champion renewable energy
development.

By doing so, the IEA sets the new normal
for the energy sector: a swift shift fromfossil fuels to renewable energies, with animmediate end to new fossil fuel supply
projects and a power system speeding up
toward carbon neutrality. New exploration,
drilling or mining projects are explicitly
incompatible with the IEA’s 1.5°C scenario,
while current liquified natural gas (LNG)
development should be drastically limited
and fossil-running power plants face a rapid
demise, making financing new plants a risky
bet. To avoid exceeding 1.5°C, coal, oil andgas production must be reduced significantly
by 2030 and must drop by 2040. Productionof fossil gas must be cut in half by 2040.

The IEA logically puts renewable energies
at the forefront of transition, making theirdevelopment one of the key features of the
NZE. Solar and wind power supply rises from
10.4 exajoules (EJ) in 2020 to 60.5 EJ in 2030
and 190 EJ in 2050. Solar power capacity ismultiplied by almost six from 2020 to 2030
and wind power capacity by five. Hydropower
progressively rises and geothermal andmarine energy triples from 2020 to 2030 toreach 31.8 EJ in 2050. The IEA underlines thatthe development of renewable energies –In this new normal, methane emissions
from fossil fuel operations are cut by 75%
by 2030. A major improvement, which would
require making limiting flaring and leaks a“top priority”. The reduction of fossil fuelproduction makes up for a significant shareof methane reduction efforts, even though
Reclaim Finance underlines that this share
could grow if the closure of unconventional
oil and gas reserves were to be prioritized or
4along with the electrification that goes with
it – plays a key role in containing the rise ofenergy bills worldwide and will help absorb
fossil fuel price shocks in the future.

to decarbonize the industry and transport
sectors. Hydrogen from natural gas withCCS – so called “blue hydrogen” – is forecast
to have a high global warming impact, but
in the NZE makes up as much as half of “lowcarbon” hydrogen production in 2030 andalmost 40% in 2050.

However, the IEA has a long track recordof underestimating renewable energy
development. In the NZE, the IEA assumes
limited cost reductions for wind and solar
compared to the cost reduction trends ofrecent years. The WEO 2021’s cost estimatesfor renewables are above those of otheranalyses and the reduction of these costs isoddly slow after 2030. These assumptions
for renewables drive the IEA to bet big on
the development of technologies that havealready shown major limitations, are highly
uncertain and can have major environmental
impacts.

The IEA classifies biomass as “renewable”,
sidelining major concerns around its overall
carbon footprint and impact on global
land-use. Biomass is used to both capturea significant amount of emissions and to
generate a great deal of energy. Biomass
becomes a major energy source in the NZE,
rising from 62 EJ in 2020 to 102 EJ in 2050
(19% of total energy supply). The total landarea dedicated to bioenergy production
increases from 330 million hectares (Mha) in
2020 to 410 Mha in 2050, the size of India andPakistan combined and more than a fourth of
total available cropland. This would likely have
major negative impacts on food production,
small farmer and Indigenous land rights, andbiodiversity.

High reliance on carbon capture and storage(CCS/CCUS) and carbon dioxide removal(CDR) enables the IEA to allow higher
production and consumption of fossil fuels
than other 1.5°C scenarios, and to prolong
their use up to 2050 and beyond. Despite
major uncertainties regarding the viabilityof large-scale use of CCS/CCUS, which areacknowledged by the IEA itself, the volume
of carbon captured increases 41 times from2021 to 2030, notably enabling the use of“abated” coal and gas power plants.

The NZE features a significant increase innuclear power capacity, especially in emerging
markets and developing economies. Nuclear
provides 41.4 EJ in 2030 – a 41% increase
compared to current levels – and reach 60.6
EJ in 2050. Much of the increase up to 2030
is due to projects that have already entered
the construction phase. If the IEA mentions
that nuclear development will not always be
acceptable, it fails to underline the various
sustainability concerns it brings. Nuclear
energy poses major issues around the disposalof radioactive waste and potential incidents.
Because building new reactors takes many
years – currently usually more than a decade –and is costly, nuclear energy could also delay
the overall transition to a clean economy.

The volume of carbon removed by direct air
capture (DAC) and bioenergy with carbon
capture and storage (BECCs) is multiplied bymore than 300 times by 2030 from today’s
extremely low level. Together, CCUS and CDR
allow the NZE to feature a slower reductionof coal, oil and gas production levels thanhighlighted by the UN Production Gap Report
2021. In the NZE CCUS plays an essential rolein the scale up of hydrogen production, used
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RECOMMENDATIONS“

No new oil and gas fields
are required beyond thosealready approvedfor development”

IEA, WEO 2021

Taking stock of the WEO 2021, financial institutions, companies andpolitical leaders must:

1. Immediately end their support to new fossil fuel supply, unabatedfossil fuel power plants1 and LNG projects2 and to the companies thatdevelop them;

2. Ensure fossil fuel production plans feature a swift and significant drop
in fossil fuel supply and a drastic cut in methane emissions;

3. Redirect their investments to support clean energy alternatives.3
The IEA itself must go further than the latest WEO and the NZE, notably by:

1. Providing all the regional data for the NZE;
2. Significantly limiting the WEO and NZE’s reliance on CCUS and CDR
by adopting a precautionary approach to these uncertain approaches,
thus implying an even more rapid phase-out of fossil fuel production
and use;

3. Limiting the NZE’s reliance on biomass to consider competing uses,
ensure sustainable production, and not require an expansion in landuse, notably by avoiding the use of biomass for power generation;

4. Limiting the global development of nuclear energy to projects
currently under construction.

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INTRODUCTION
The NZE: setting the new normalPthe “benchmark for assessing global progress
towards the 1.5°C target and other energyrelated sustainable development goals” andis compared to other scenarios based on
countries’ actual pledges (APS) and statedpolicies (STEPS) (see G1 and Box – IEA’s WEO
2021 scenarios).

olitical leaders, CEOs, bankers, insurers…
A lot of people were anxiously waiting for
the International Energy Agency to dropits World Energy Outlook 2021 (WEO), andrightfully so. Ahead of COP26, the IEA’s flagshippublication was scheduled to include for the
first time the IEA’s recent “Net Zero Emission
by 2050” scenario (NZE). This scenario,
released in May 2021, sent shockwaves
through the energy sector by explicitly callingfor an end to fossil fuel expansion.

The IEA focuses on the “ambition gap”
between current policies and announced
pledges – modelled respectively in the STEPS
and APS – and the NZE. Several crystalclear takeaways can be extracted from thiscomparison:

While the IEA has long advertised its WEO as“the energy world’s most authoritative sourceof analysis and projections” – an assessment
shared by many in the political, economic andfinancial world – this year’s issue is presented
upfront as a “guidebook to COP”. A book that“provides stark warnings about the pathwaythat we are on, but also clearheaded analysisof the actions that can bring the world ontoa path towards a 1.5 °C future – with a strong
affirmation of the benefits that this yields”.
And indeed, in the WEO, the NZE becomes• We must strive to limit global warming to
1.5°C, failing to do so would have severe
human and economic consequences while
doing it would deliver clear benefits. The
NZE would notably generate 24 million“net” new jobs by 2030 while reducing
deaths from household air pollution by 1.9
million each year and delivering electricity
to all (see Box – The benefits of the NZE
trajectory).

G1. CO2 and methane emissions from energy and industrial
processes in the three scenarios, 2030“

The main normative scenario is
the Net Zero Emissions by 2050
Scenario, which outlines a narrow
but achievable pathway to a 1.5 °C
stabilisation in global averagetemperatures.
IEA, WEO 2021

• Limiting global warming to 1.5°C canbe done but requires immediate andambitious actions, as well as action toensure a just transition. We have all thetechnologies we need to fast forward thistransition and can already solve 40% of theambition gap with zero-cost technologies.

securing the oil supplies of OECD countries.
It has long focused on energy security, andinterpreted this to largely mean a secure supplyof fossil fuels. Coal, oil and gas companies,
as well as the major fossil fuel-consuming
countries, have been continuously involvedin the IEA’s work. Financial institutions like
JP Morgan, Société Générale and ING haveused the IEA’s past “Sustainable Development
Scenario” (SDS) to claim an alleged alignmentof their climate policies with the Paris
Agreement, or justify their continued support
of fossil fuel companies (see Annex). As
discussed below, the IEA is largely supportiveof the large-scale use of negative emissions,a risky and expensive approach that could
impede climate action and that has been
aggressively pushed by coal interests4 andthe oil and gas majors. In brief: the IEA is
not an activist body or “anti-fossil fuels”, its
NZE is far from extreme and should be rather
considered a middle-of-the-road pathway.
By putting the NZE at the center of its WEO,
the IEA sets the new normal for the energy
sector and its backers.

• Key milestones are defined by the IEA
to monitor our progress toward the
1.5°C target, these milestones have
major climate impacts and testify of thetransition of the energy sector.
• Current pledges and policies are far fromaligned with a 1.5°C trajectory.

Source: WEO 2021

8”

The fact that the IEA now focuses on 1.5°C
and is underlining the deep implicationsof this trajectory for the fossil fuel sector
sends a strong signal about the seriousnessof the emergency we are in. The IEA has beena trendsetter in the energy sector for decades
and wields considerable influence in the political and financial spheres. The organization
was initially created in the wake of the 19731974 energy crisis with the explicit goal of9Box 1 – IEA’s WEO 2021 scenarios
The IEA uses four scenarios in its WEO 2021:• Net-Zero Emissions by 2050 (NZE): which sets out a pathway for the global
energy sector to achieve net-zero CO2 emissions by 2050. In this scenario,
temperatures peak at just over 1.5°C in 2050 and decline to around 1.4°C by
2100 (with 50% probability5).
• Sustainable Development Scenario (SDS): which achieves key energy-related
United Nations Sustainable Development Goals related to universal energy
access and major improvements in air quality and reaches global net zero
emissions by 2070. In this scenario, temperatures exceed 1.5°C by the early2030s and reach a peak of 1.7°C around 2050 (with 50% probability).

failing to reach carbon neutrality by 2050. According to the IEA itself, this additional
CO2 could push global warming above 2°C in unfavorable scenarios.
Though the NZE is now the central scenario in the WEO, it is not yet featured in
the regional data tables at the end of the report. If we can assume that this is due
to a lack of time, swiftly providing these data should be a priority for the IEA toensure that the NZE is fully and easily usable by all.

CO2 emissions in the WEO-2021 scenarios over time

• Announced Pledges Scenario (APS): which assumes that all climate
commitments made by governments around the world, including Nationally
Determined Contributions (NDCs) and longer-term net-zero targets, will be
met in full and on time. In this scenario, global warming exceeds 1.5°C byaround 2030 and leads to a 2.1°C increase by 2100 (with 50% probability).
• Stated Policies Scenario (STEPS): which reflects current policy settings basedon a sector-by-sector assessment of the specific policies that are in place, as
well as those that have been announced by governments around the world.
In this scenario, global warming exceeds 1.5°C by around 2030 and leads to a
2.6°C increase (and rising) by 2100 (with 50% probability).

Temperature rise in the WEO-2021 scenario (°C)

Source: WEO 2021

Source: WEO 2021

While the SDS is still present in the WEO 2021, it virtually disappears from thecore of the report, is not even mentioned in the executive summary, and notcited as one of the “main scenarios” in the Outlook. The NZE effectively replaces
the SDS as the benchmark for climate progress. As shown by the figure below,
following the SDS means emitting significantly more CO2 than in the NZE and10

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Box 2 – The benefits of the NZE trajectory
If these priorities require a major economic and political shift, the IEA estimatesfollowing them and limiting global warming to 1.5°C would deliver immense
human, social and economic benefits.
In total, 26 million jobs are created in the clean energy sectors by 2030 in the
NZE.6 While employment diminishes in the fossil fuel sector, the NZE would still
generate about 24 million “net” jobs by 2030.

programmes for low-income housing deliver the greatest benefits, while highly
energy-efficient workplaces and schools have also demonstrated positive
impacts on productivity”. Overall improvements in energy efficiency contributeto increase productivity and living standards.

Share of the population exposed to various PM2.5 concentrations
and premature deaths from ambient air pollution in 2030

Employment growth in clean energy and related areas to 2030

Source: WEO 2021

Source: WEO 2021

People without access to electricity ad access rates by region in theStated Policies and Net Zero Emissions by 2050 scenarios, 2020-2030

While the STEPS and the APS see a rising number of premature deaths fromambient pollution during the next decade, the NZE leads to dramatic reductions:by 2030 there are 1.9 million fewer premature deaths7 from household air
pollution per year than in 2020, with over 95% of the reduction occurring inemerging market and developing economies.
The NZE “offers a pathway to deliver electricity to all by 2030”, through either
grid connection or the development of mini-grids and stand-alone systems.8
By 2050, almost every consumer will be connected to the power grid. All will
have access to clean cooking by 2030 in the NZE, while 2.1 billion people are still
without access to clean cooking in 2030 in the STEPS and APS.
The IEA also notes that progress on building energy efficiency and heating/cooling can “foster good physical and mental health by creating indoor living
environments with healthy air temperatures, humidity levels, noise levels andimproved air quality”. It especially underlines that “energy efficiency retrofit

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Source: WEO 2021

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1. THE NEW NORMALFOR FOSSIL FUELS

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F

or the fossil fuel sector and those that
finance it, the WEO sets two unavoidable
prioritizes: putting an end to fossil fueldevelopment and ensuring that methane
emissions are massively reduced.

Based on data from Rystad Energy, even if
coal would be phased out overnight, current
oil and gas reserves under exploitation alreadytotal 1.277 trillion barrels of oil equivalent(boe) and consuming them would emit about
475 GtCO2, enough to exceed by as much as
75 GtCO2 our remaining carbon budget tohave a 67% chance to limit global warming to
1.5°C. Reserves under development or field
evaluation – last stage of the appraisal phase scheduled to be exploited within 0 to 7 years,
reach 186.2 billion boe, a 14.6% increasethat could add between 58.6 and 77.9 GtCO2
to the atmosphere.9 Together, oil and gas
reserves exploited and under development
would result in an overshoot of our carbon
budget to have a 67% chance to limit global
warming to 1.5°C by at least 33.4%. Despite
still allowing significant amounts of carbon
capture and removals (see part 2.a), thestudy Unextractable fossil fuels in a 1.5 °C
world underlines that nearly 60% of oil
and fossil gas, and 90% of coal developed
and undeveloped reserves must remain
unextracted to keep within a 1.5°C carbon
budget. While these numbers may seem
impressive, the researchers themselves stressthat they “probably present an underestimateof the production changes required, because
a greater than 50% probability of limiting
warming to 1.5°C requires more carbon to stayin the ground and because of uncertainties
around the timely deployment of negativeemission technologies at scale.”a. Ending fossil fueldevelopment
In its May 2021 “roadmap” to net zero by 2050,
the IEA clearly stated that its NZE scenario
meant that “no new oil and natural gas fields”
and “no new coal mines or mine extensions” are“required beyond those that have already been
approved for development“. The WEO 2021
confirms this, stating that NZE has “no newinvestments in supply projects beyond thosealready announced or under construction”.
Concretely, this means that any investment
in new coal mines or oil and gas fields after
2021 are incompatible with a 1.5°C trajectory.
These new investments would risk becoming
stranded and increase the asset-stranding risk
for other mines and fields by widening the
gap between fossil fuel production capacity
and the remaining carbon budget. The IEA
notably warns that additional investment in oil
fields “would be surplus to requirements in the
NZE and could struggle to return the capital
invested.”
While the IEA notes several times that the drop
in fossil fuel production and immediate end to
new supply projects in its NZE is predicatedon strong policy actions to reduce demand,it also underlines that “actions on the supply
side remain crucial to orderly and rapid energy
transitions.” In fact, the transition must rely
on both supply and demand action. Over the
past decades, policymakers have focused on
measures to increase clean energy supply or
reduce fossil fuel demand, largely ignoring thefossil fuel supply side, a strategy that has notbeen paying results because new fossil fuelproduction effectively locks in future carbon
emissions.

Fossil fuel supply projects are not the only
type of projects that are incompatible with
1.5°C. As the IEA has underlined, alreadyplanned liquified natural gas (LNG) projects
are not “necessary” in the NZE (see G2).
This conclusion stems from the fact that
the GHG footprint from the full LNG life
cycle (including extraction, liquefaction,transport, and re-gasification) effectively
doubles the GHG emissions generated bysolely the combustion of fossil gas.10 While
LNG trade “peaks in the mid-2020s at 475
bcm and falls to 2020 levels of 390 bcm by2030”, around 600 bcm of LNG liquefaction
capacity already exists today and 180 bcm
is under construction. By 2030, the LNG
liquefaction capacity would therefore be
twice the demand. According to the IEA,The IEA’s conclusion is logical and derives fromthe great mismatch between the amounts of
CO2 that would be released by exploiting andconsuming the already developed fossil fuelreserves and our remaining carbon budget.
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Box 3 – No new fossil fuel supply investment: what
does the IEA mean?
One of the key messages of the Net Zero by 2050 roadmap is that “fossil fuel use
falls drastically in the Net Zero Emissions Scenario by 2050, and no new oil andnatural gas fields are required beyond those that have already been approved fordevelopment”. As the graph below shows, several stages can be identified in theplanning and building of new projects.

Source: Reclaim Finance

The final investment decision – after the “appraisal” phase in the above graph – isthe point at which a project is considered “approved for development” in standard
industry practice. This is when government permits are in hand, financing in place,and construction begins in earnest to bring a project into operation. Any fielddevelopment not yet approved by a final investment decision as of 2021 would
therefore be incompatible with the NZE scenario. It follows that governments
and companies should stop exploring for not-yet-discovered reserves andstop development of any reserves beyond fields already producing or underconstruction as of 2021. Before the final investment decision, projects enter«field development». As this step entails significant investments and operational
progress, such projects are accounted for in the Global Oil and Gas Exit List
(GOGEL) «future development» metric that represents, for each company, thetotal resource of projects that will enter the production stage in the near term.
While some investment in existing oil and gas fields is assumed in the NZE to slow
down declines in production and reduce the carbon intensity of operations, thisis within an overall context of winding down production and capital investment inproduction, not expanding it.

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“most of the 200 bcm worth of LNG projects
currently under construction do not recover
their invested capital” resulting in “stranded
capital estimated at USD 75 billon11”. The
gap between the already sanctioned LNG
capacity and the demand for it in the NZE
increases rapidly after 2025.12 According to
Climate Analytics, following the NZE would
require a much faster drop of LNG productionin Australia, which is still developing 44
new gas projects with the largest volume of
production designated for export as LNG.13
Focusing solely on economic and financial
factors, IEEFA finds that 62% of LNG terminals
and 66% of gas-fired power plants projects
in seven Asian countries developing LNG-topower projects are not viable.

economies”14
and2040
worldwide.15
The power sector must drastically speedup its decarbonization: in 2020, 38% ofelectricity generation came from ”low-carbon
technology” but to align with the NZE thismust jump to over 70% by 2030. This notably
entails immediately “halting the approvalof new unabated coal plants16 and closing
around 40% of the existing coal power fleet
by 2030,17 on the way to phasing out unabatedcoal plants by 2040.18 However, coal plants are
not the only ones on the spot: gas-fired plants
are also directly affected. Indeed, unabatedgas electricity production drops by 30% from2020 to 2030 in advanced economies in the
NZE – and slightly diminishes globally - andalmost disappears by 2050.19 Gas-fired power
generation - whether abated or unabated - isless than a third of 2020’s levels in 2040, withunabated gas-fired power generation fallingby 90%. Furthermore, considering the highcost of CCUS, the current failures to operate

Similarly, the power sector undergoes drasticchanges in the NZE: electricity sector
emissions fall by close to 60% by 2030, toreach carbon neutrality by 2035 in “advanced

G2. Global LNG demand under different IEA scenarios, and future
supply from sanctionned projects

or finance CCUS plants, and the overall
uncertainty surrounding its deployment,
companies should simply refrain frombuilding new gas power plants if we are toreach the carbon neutrality objectives laidout by the IEA.

a 38% rise in BP’s energy outlook). Following
these trends, fossil fuel companies that do
not adopt plans to significantly scale down
their production are clearly incompatible
with the NZE.21

b. Drastically cutting
methane emissions

While fossil fuel power generation plays a largerole now in providing power system flexibility,
it is not the only, nor the best, resource
available for doing so. In the NZE scenario,
fossil fuels would be replaced by “dispatchable
low emissions sources” and be only marginallyused to ensure the flexibility of the powersystem in 205020 (see G3). Going further thanthe IEA NZE, Jacobson and al underline that a
100% renewable energy power system withstorage in the US would significantly reducethe cost of energy while avoiding blackouts
and ensuring energy flexibility.

Reducing fossil fuel use and production is also
vital to achieve one of the key targets of the
NZE: the reduction of methane emissions by
75% by 203022 (see G5). Reducing production
plays an important role in driving down
methane emissions from coal, oil and gas
and is key to achieving the IEA’s objective.
Declining fossil fuel production makes up athird of the methane reduction necessary toachieve the IEA’s goal. The IEA stresses that“the most effective way to reduce (methane)emissions from coal is to produce less.”

Globally, the fossil fuel production trends
shown in the NZE are at odds with current
trends. Coal, oil and gas supplies decrease
from 2020 to 2030 and are massively slashedby 2050 (see G4). Even the APS scenario
requires a reduction of the production of fossil
fuels by 2050. Production of fossil gas starts
declining after 2025 and drops by 46% from2020 to 2040 and 56% to 2050 (compared to

However, the IEA underlines that reducing
production alone won’t be sufficient.
Minimizing methane leaks and flaring should
be “a top priority”23 in the quest to reduce
emissions from fossil fuel operations. About
45% of current oil and gas methane emissions
could be avoided at “no net cost” given theG3. Electricity system flexibility by source and scenario, 2020 and 2050

Source: Adapt to survive, Carbon Tracker

Source: WEO 2021, IEA

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G4. Energy supply and demand by fuel and sector, 2020 and 2050

Box 4 – Dirty energy vulnerable to physical risks
LNG plants, refineries and thermal power plants are all significantly exposed tophysical risks stemming from climate change. Around 13% of the world’s coastal
thermal power plants, 25% of onshore LNG plants and 10% of coastal refining
facilities are already at risk of experiencing severe coastal floods. More broadly,
over 50% of LNG plants and 35% of refineries are exposed to very high risks fromviolent storms.

Share of energy infrastructure capacity
at risk of destructive cyclones, 2020

Source: WEO 2021, IEA

Source: WEO 2021, IEA

Mines, refineries, thermal power plants and nuclear plants are also impacted bywater stress.
Around a third of existing thermal and nuclear power plants using freshwatercooling are located in high water stress areas, and this share is set to increaseover time due to climate change to reach 40% by 2040 according to the IEA.

Share capacity by water stress level

Source: WEO 2021, IEA

20value of the gas that would be captured – andthen sold – in the process.

later in this analysis (see part 2.a), the NZE
still relies on important quantities of fossil
fuels. Furthermore, methane emissions havebeen chronically underestimated in the past24
and major leaks are regularly discovered.25

Reducing methane reduction by 75% by 2030
requires actions from governments but the
IEA stresses that companies alone can achieve
most of this reduction by implementing
voluntary measures all along their supply
chain (see G6). Concretely, this means thatfossil fuel companies and those that financethem have no excuse not to prioritize
methane abatement, along with the general
reduction of fossil fuel production. Reducing
methane emissions would help maintainproduction from existing oil and gas wells andcould easily fit into a 1.5°C alignment strategy
that immediately puts an end to new fossil
fuel supply projects and progressively andsignificantly lowers fossil fuel production.
Of course, further methane reductions
could be achieved from reducing fossil fuelproduction at a faster pace. As we underline

Shale oil and gas disproportionately
contribute to global methane emissions,notably due to the process of fracking used to
extract them. Fracked oil and gas have beena key driver of the rise of methane emissions
in the past decade. In the world’s largest
site of shale oil and gas expansion, the U.S.
Permian Basin, 3.7% of extracted methane
may leak into the atmosphere, making
Permian gas more dangerous for the climate
than coal. Therefore, in addition to what
the IEA is promoting, the swift reduction of
unconventional oil and gas production must
be a central part of strategies to reduce
methane emissions26 (see G7).
21

G5. Methane emission from fossil fuel operations and reductions to 2030
in the Net Zero Emissions by 2050 Scenario

Source: WEO 2021, IEA“

Cutting methane is the strongest
lever we have to slow climatechange over the next 25 years andcomplements necessary efforts to
reduce carbon dioxide.
Inger Andersen,
Executive director of the U.N.
Environment Programme,
said in a statement

G6. Potential methane reduction from voluntary company action

Source: Curtailing Methane Emissions from Fossil Fuel Operations, IEA

G7. Oil and gas methane emissions by source, 2020

Source: Curtailing Methane Emissions from Fossil Fuel Operations, IEA

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”

2. THE OLD FOSSIL

FUEL HABIT DIE HARD
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W

hile the WEO requires a major shift
from the fossil fuel sector, the IEA
foresees higher levels of fossil fueluse than other 1.5°C trajectories by relying on
significant levels of carbon capture and carbon
removal. Furthermore, the IEA’s framing of
remaining fossil fuel investment is surprisingand largely misleading.

• In the NZE, fossil gas supply29 declines bya total of 7% from 2020 to 2030 (129.4
EJ). The Production Gap Report statesthat gas needs to decline by 3% each year
up to 2030 to reach about 102 EJ in 2030.
The accelerating decline of gas after 2030
– with a 42.3% decline from 2030 to 2040
- never makes up for the gap accumulated
from 2020 to 2030. This gap is largely
caused by an increase in gas use from2020 to 2025.

a. The carbon capture andremoval trick to preserve
fossil fuels

G9. Unabated natural gas use (total primary energy and demand for power)
under 1.5°C compatible scenarios compared with the IEA’s NZE pathway

However, in the NZE, oil supply declines by
19.8% from 2020 to 2030 to reach 137.4 EJ in
2030, just below the Production Gap’s 140 EJ.
The NZE significantly over relies on gas from2020 to 2035, even though it was the largest
source of the growth of fossil CO2 emissions(42%) in the last decade and is responsible forabout 60% of methane emissions from fossil
fuel production.30 Like the Production Gap
Report, 1.5°C-compatible scenarios from the
IPCC show that the unabated use of natural
gas in primary energy supply should alreadybe declining globally and needs to drop by
more than 30% below 2020 levels by 2030,
and 65% below 2020 levels by 2040.31 The
NZE fails to match this trajectory (see G9).

While the WEO requires a major shift awayfrom the fossil fuel sector, the IEA’s NZE
scenario nonetheless maintains unnecessary
and dangerous levels of fossil fuel reliance byassuming significant deployment of carbon
capture and carbon removal. In the short term,
the IEA allows for substantially more coal andgas use than the 2021 UN Production Gap
Report27 (see G8):
• In the NZE scenario, coal supply28 declines
by only 56.7% from 2020 to 2030 to reacha level of 71.9 EJ ; in the Production Gap
Report it drops 11% a year to reach lessthan 50 EJ in 2030.

Source: Why Gas is the new coal, Climate Analytics

Source: Reclaim Finance based on data from WEO 2021 and Production Gap Report 2021

Source: Reclaim Finance based on data from WEO 2021

26

27

Box 5 – The Production and coal gaps
The UN Production Gap Report 2021 states that, with current national energy plansand projections, fossil fuel production would be 110% higher in 2030 than what
would be consistent with limiting global warming to 1.5°C, and 45% more thanwould be consistent with limiting warming to 2°C. By 2040, this excess grows to
190% and 89%.

sell their coal assets instead of retiring them. Looking at country-level pledges
and plans before COP26, Ember identified 44 governments that have committed
to no new coal, 40 governments that have no proposed new coal projects, and 37
countries that still have proposed coal projects. Even if the number of countries
committing to phase-out coal increased at COP26,35 the challenge remains
immense: TransitionZero estimates about one coal power unit should be closed
each day between now and 2030 – 3000 in total - to be consistent with the IEA
NZE.

The report underlines that the production gap is “widest for coal in 2030”, withproduction plans and projections that would lead to around 240% more coal,
57% more oil, and 71% more gas than would be consistent with limiting global
warming to 1.5°C.
The Production Gap Report is based on IPCC SR1.5 scenarios. Its 1.5°C trajectory is
the median of IPCC scenarios with at least a 50% likelihood of limiting warming to
below 1.5°C by end-of-century. This scenario is constrained by how much carbon
removal is deployed, ensuring that they sequester an average of less than 5 GtCO2
per year from BECCS and less than 3.6 GtCO2 per year between 2040 and 206033.
These levels of removal are equivalent to the upper limits of the sustainability
ranges that can be found in the scientific literature.34 The report points out that
“if carbon dioxide removal technologies fail to develop at large scale […] theproduction gap would be wider”.

The production gap

Source: Production Gap Report 2021

If the coal sector is increasingly under the spotlight for its impact on climate it
continues to expand significantly. The 2021 Global Coal Exit List - published byUrgewald and 40 other NGOs including Reclaim Finance – estimates that 503
of the 1,030 companies that form the bulk of the global coal mining and powerindustry are planning new mines, power plants or other coal infrastructure. The
proposed projects represent up to 480 GW of new coal-fired power capacity and1.8 billion tonnes of coal a year. Only 32 coal companies have announced coal exit
dates consistent with achieving the goals of the Paris Agreement but may only

28

In the IEA NZE, fossil fuels continue toaccount for a significant portion of theenergy mix in 2050, making up for 120 EJ in
2050, the equivalent of 60% of the energy
provided by wind and solar power and 22% of
the total energy supply.32
To allow continued reliance on fossil fuels,
and first and foremost on gas, the IEA
forecasts large-scale deployment of carbon
capture and storage (CCS / CCUS) and theuse of negative emissions such as biomassenergy with carbon capture and storage(BECCS) and direct air capture (DAC).
The use of unabated fossil fuels still generates
1689 MtCO2 emissions in 2050, which aresupposed to be entirely offset by BECCS and
DAC. In fact, BECCS and DAC remove 1934
MtCO2 from the atmosphere in 2050 and
317 Mt as soon as 2030,36 compared to 1 Mt
today.37 The electricity and heat sector evenbecome CO2 negative in 2040 in the NZE andcontribute to reducing CO2 by 369 Mt in 2050
thanks to BECCS and despite still relying onsome coal and gas. This is achieved thanks tothe parallel use of CCUS: in 2040, 49% of theremaining coal supply and 41% of gas is usedwith CCS, these numbers reach respectively
81% and 71% in 2050 (see G10).
The projection for CCS deployment seems
particularly unrealistic (See Box – The CCS
illusion). Of a total 7.6 GtCO2 captured38 andstored in 2050, 70% comes from CCS (risingfrom close to zero today) and 25% from BECCS
and DAC (see G11). 1665 MtCO2 are captured
in 2030, more than three times the level of the29

IPCC’s P2 pathway and more than 41 times
current levels.39
In its May report, the IEA indicated that 55%
of CCS emission reductions comes fromsuch unproven technologies (see Box – The
CCS illusion), and implicitly recognized that
this level of CCS deployment is unrealistic
by presenting a “low CCS” case where CCS
capacity does not expand beyond current andalready planned infrastructure.40 If the IEA
choose not to present this case in its WEO,
it still identifies CCUS deployment as oneof the main technological challenges to be
overcome, underlining the mismatch between
current deployment and NZE requirements.
The agency underlines that closing this gap
will require “breakthrough programmes” (seeG12).
A large share of this CCS deployment in the
NZE is used to abate emissions from industry41
and to enable a huge buildup of so-called“low carbon” hydrogen production, muchof it produced from coal and gas: 46% of
the hydrogen output in 2030, and 38% in
2050. Hydrogen-based fuels and fossil fuels
equipped with CCUS account for 3% of total
final consumption by 2030, up from almost
nothing today. This is highly problematic as
the efficiency and availability of CCUS is highly
uncertain and the greenhouse gas emissions
from fossil-fuel based hydrogen with CCUS –so-called “blue hydrogen” – could be only 9 to
12% lower than without CCUS and even 21%
greater than simply burning natural gas orcoal for heat according to a study by Robert
Howarth and Mark Jacobson (see G13).

G11. Global CO2 capture by source in the NZE

G13. Greenhouse gas footprint per unit of heat energy

Source: Net Zero by 2050, IEA

G12. CO2 capture capacity by project and scenario, 2030

Source: How Green is blue hydrogen?, Robert W. Howarth and Mark Z. Jacobson

Source: WEO 2021, IEA

As the IEA underlined in its May report, lower
reliance on CCUS and CDR is possible: itrequires a much-faster drop in fossil fuelproduction and build-up of renewableenergy capacity and renewable hydrogenproduction. Furthermore, we note that the
IEA could also have opted for a pathway
with overall reduced reliance on hydrogenby better prioritizing its uses42 and notably
reducing the reliance on hydrogen for thetransition of the power sector.

in the NZE, fossil fuels continue to benefit
from significant investments to maintaincurrent infrastructures and reserves. Capitalspending on oil and gas supply still amounts
to $365 billion per year from 2021 to 2030 – alevel only 30% below that of recent years andabove expenditures in 2020.49 After 2030, oiland gas supply expenditures fall to $171 billion
per year. On average, $235 billion are spentannually on fossil fuels in the NZE from 2021
to 2050. Furthermore, only a small portion ofthese investments – about $13 billion a year
– is required to put all methane abatement
measures in place (cf part 2.b).

b. Fossil fuel investments still
unaligned

The IEA mentions that projected investment
in oil and gas is now aligned with the changes

Despite the end to new fossil supply projects
30

needed to reach net zero emissions ofgreenhouse gases by 2050.50 This conclusion
seems to be drawn from the fact that oil andgas investment fell significantly in 2020 andearly 2021. However, this fall is the result of
the Covid crisis - not of new company plans ora policy drive shift – while the previous fall in
oil and gas investment was caused by the oil
price crash in 2015. Oil and gas investments
have been slightly increasing in the latter partof 2021 and will likely continue to do so in
2022.

In 2019, global investment in upstream oil
and gas and in the coal supply was still $574
billion51 before dropping in 2020. For upstream
oil and gas alone, 2019 investments exceed
the 2021-2030 annual investment under the
NZE trajectory by as much as $110 billion(30%). To summarize, the level of fossil fuelinvestment required in the NZE represents
only a fraction of the investment in the sector
made in the last decade (see G14).
According to the Global Oil and Gas Exit List,
over the past three years oil and gas companies
spent $168 billion on exploration for new oil
and gas resources.52 Capital expenditures

From 2016 to 2018, $719.4 billion were spentannually on “high carbon liquids and gases”.

Average annual upstream oil and gas investment by scenario

Source: WEO 2021, IEA

31

Box 6 – The CCS illusion
As major industry leaders like the CEO of the energy company Enel has emphasized,
the energy industry tried hard in the last decades to develop CCS but “it doesn’twork”. CCS projects – like Chevron’s Gorgon project in Western Australia, touted
as a flagship CCS project in the oil and gas industry - repeatedly failed43 to capture
significant amounts of GHG in the past, leading to higher GHG emissions. The
cost of CCS has also been a prohibiting factor,44 making its use especially
uncompetitive compared to renewable alternatives.

Recent market prices Levelised Cost of Electricity 2020

The climate and environmental impact of carbon capture can be especiallynegative in the event of leaks, where carbon is released into the atmosphere orcontaminate groundwater and the soil. Safe storage sites are expected to be alimited resource and not evenly distributed across the world. In 2020, the ruptureof a CO2 pipeline in Mississippi required residents to seek medical treatment andaffected local plants and wildlife.
To summarize, as the Climate Action Network (CAN) underlines, CCS “at scale”
is largely unproven and its potential to deliver significant emissions reductions
is limited. CCS is especially not needed to decarbonize the power sector48 anddiverts investments for renewable energy development. The IEA notably fails to
integrate the potential environmental and climate impacts of CCS. As the IEA’s
own publication shows, its confidence in CCS development is mainly based on its
opinion that there is a ”momentum” around CCS deployment and that investments
are being made in the technology, not on the technology itself or past experiences.

Pipeline of commercial CCS facilities from 2010
to September 2021 by capture capacity

Source: Why Gas is the new coal, Climate Analytics

The cost reductions in renewables are increasingly eroding the value CCS and
CCUS in the power sector and for hydrogen production.45 The Climate Action 100+
underlines that “the stubbornly high costs of CCUS in the power sector make ita risky and potentially expensive decarbonization strategy” and underlines that“power companies should focus primarily on minimizing the use of fossil fuels”.
Globally, CCS capacity only slightly increased from 2010 to 2021 and only a verysmall fraction of planned CCS capacity entered operation. Indeed, while morethan 140 MtCO2 were being developed in 2010, only 40 Mt are operational or underconstruction more than 10 years later.46 Only 27 CCS facilities are operational
today with 4 under construction.
Furthermore, carbon capture is an energy intensive process:47 capturing CO2
emissions from a gas plant requires burning more gas and capturing a highproportion of CO2 emissions requires a massive increase in energy consumption.
In the US, due to additional energy consumption, carbon capture contributed to
an increase – and not reduction – in CO2 emissions. From 15 to 25% more energy
could be required to capture CO2 from a power plant.

32

Source: Global Status of CCS 2021, Global CCS Institute33

largely varies depending on the type andlocalization of the wells and is particularlyhigh for unconventional oil and gas extraction
with a very high environmental impact.54

on new projects outside of core oil and gas
supply by large companies accounted only
for $2.1 billion in 2019, 0.8% of their capital
investment. The IEA fails to underline that oil
and gas companies are still heavily investingin new supply projects that are incompatible
with the NZE. Indeed, the Global Oil and Gas
Exit List identifies massive expansion plansfrom oil and gas majors and Carbon Tracker’s
analysis show that their capex plans are noteven aligned with the IEA’s STEP scenario(see G15).

As the IEA underlines, investments musturgently be redirected from fossil-heavy
activities to clean alternatives (see G16) if weare to meet the NZE goals that require “a surge
in global energy investment to $5 trillion by
2030, with 85% of spending directed to clean
energy.”55 Investment in power generation
should notably increase from around $0.5
trillion over the past five years to nearly $1.7
trillion in 2030, higher than the record year
for investment in fossil fuel supply.56 Most of
this funding – 70% according to the IEA - will
come from the private sector, underlining
the need for financial players to step awayfrom fossil fuel developers and champion
renewable energy development.

As underlined in part II.A, the NZE is notaligned with the Production Gap Report and
1.5°C alignment trajectories with only limited
reliance on carbon capture and storage.
Aligning with such a precautionary pathway
could notably be done by using the natural
decline rate of the production of wells thatreaches 4.4% for oil.53 This decline rate

Box 7 – Energy Return on Investment: an increasingly
bad business?
Energy Return on Investment (EROI) is a ratio to measure energy produced inrelation to the energy used to do so. For example, this ratio can illustrate howmuch energy is used to produce oil relative to how much useable energy is created.
This indicator plays a key role in the oil and gas sector as it helps to identify whichenergy sources are cheaper and more efficient.
Research suggests that the EROI for oil and gas have been steadily dropping over
the years. According to Louis Delannoy and al., the energy necessary for the
production of oil liquids represent today 15.5% of the energy production of oil
liquids. This percentage is growing at an exponential rate: “by 2050, a proportion
equivalent to half of the gross energy output will be engulfed in its own production”.

EROI and energy required to produce oil from 1950 to 2050

G14. Global upstream oil and gas investment

Source: “Peak oil and the low-carbon energy transition: a net-energy perspective”, Delannoy and al.

Source: WEI 2020, IEA

Sources with low EROI are difficult to access and often the ones that are the mostGHG-emitting and detrimental to the environment, and especially unconventional
oil and gas. As IEA’s assumption in the NZE that fossil fuel supply will be concentrated
in a few countries suggests, unconventional oil and gas sources are often costly to
exploit and would therefore logically be the first to be affected by the transition.
The sharp decline in the EROI of fossil fuels are bringing them closer to – and evenbelow - what is often measured for renewable energies. As the EROI for fossil fuelscontinues to decline, the gap between these polluting energies and renewables
will widen.57 The EROI for biomass remains low and can be just above 1 but
significantly varies depending on the biomass usage. According to W. Prananta
and al. in Indonesia the EROI is 3.92 from biofuels from palm oil and 3.22 for otherbiofuels.

34

35

G15. 2021-2030 unsanctioned capex by scenario(% of steps unsanctioned capex) - selected companies“

Companies are still approving
billions of dollars of investment inmajor projects that are inconsistent
with the 1.5°C Paris climate target,and even those with “net zero”
commitments are continuing to
explore for new oil and gas.
Carbon Tracker, September 2021

Source: Adapt to survive, Carbon Tracker

G16. Average annual energy investment 2016-2020, andin the Net Zero Emissions by 2050 Scenario

Source: WEO 2021, IEA

36

37

”

3. DID YOU SAY“LOW CARBON”?

38

39

T

he NZE fails to provide a truly sustainable
pathway by massively relying on
biomass. It also fails to account for
the various risks and limitations of nuclear
energy. This means that the NZE undermines
the role played by renewable energies in the
global transition.

used to reduce emissions from coal power
plants, despite the fact that the European
Academies’ Science Advisory Council (EASAC)
underlines that “it is of considerable concernthat scientific analyses indicate that, far fromreducing GHG emissions, replacing coal withbiomass for electricity generation is likely toinitially increase emissions of CO2 per kWh”.

a. The biomass risky gamble

The IEA integrated a “low biomass” case in
its May report, where land use for dedicatedbioenergy crops and forestry plantations
remains at today’s level (330 Mha) in 2050
and biomass produces 90 EJ of energy in
2050. It admits that it is possible to achieve
net-zero without expanding land use forbioenergy but indicates that it would require
additional investments – notably in solar,
wind and energy networks – and come at an
overall significantly higher cost. However,this “low biomass” case has not informed theWEO 2021. The IEA’s preference for massive– and seemingly unsustainable and unviable –biomass use seems to emanate from the factthat it allows for the continued use of existingfossil infrastructure, and therefore minimizes
the risk of stranded assets and limits the needfor new investments.

In the NZE, biomass becomes a major energy
source by 2050, rising from 62 EJ in 2020
to 102 EJ in 2050 (see G17), thus making up
for 19% of total energy supply and almost
as much as solar energy (109 EJ). “Modern
biomass” swiftly replaces traditional uses thatare phased-out by 2030.58 The total land area
dedicated to bioenergy production in the NZE
increases from 330 million hectares (Mha) in
2020 to 410 Mha in 2050,59 the size of India
and Pakistan combined and more than afourth of total available cropland.60 While thebulk of the increase in biomass use is due tomodern solid biomass, the NZE also features asignificant role for biofuels – the production ofwhich nearly triples by 203061 - and biogases –that more than double by 2030.62
The NZE relies on BECCS to capture 1.3
GtCO2. While this amount falls within thesustainability range from the IPCC’s SR1.5 (0.55 GtCO2), it still raises questions regarding
its impact on land-use and its feasibility in acontext of overall massive carbon capturedevelopment (see part 2.a). Furthermore,
the NZE is more reliant on bioenergy thanother 1.5°C scenarios. It greatly exceeds theamounts of bioenergy used in IPCC P1 and P2
scenarios (see D1).

G17. Total bioenergy supply in the NZE

Source: Net Zero by 2050, IEA

D1. Comparison between bioenergy reliance in various climate scenarios

According to the Energy Transitions
Commission (ETC), 40 to 60 EJ of sustainablebiomass could be generated globally eachyear by 2050, compared to 62 EJ of biomassenergy in 2020 and 102 EJ in 2050 foreseen in
the NZE. The ETC underlines that producing
sustainably 60 EJ of biomass would requireradical changes to free-up land and develop
new biomass sources. Following the ETC’s
recommendations, it is clear that biomass
production should be reduced – not increased– at the global level. The ETC also underlines
the necessity to consider the competing usesof biomass, and thus to opt for sustainable
alternatives where they are available, such as
in the power sector.

Furthermore, biomass use for power
generation can emit large quantities of CO2,a fact that does not seem to be accounted
for in the NZE. Notably, the use of woodand forest biomass could generate greater
emissions per unit than coal and contribute to
deforestation worldwide.63 However, biomass
is broadly considered as a renewable energy by
the IEA, accounting for 28% of the renewableenergy production in 2050. More than halfof the IEA’s bioenergy comes from forest
and wood (55 EJ). The IEA also mentions
biomass as a “low emission fuel” that can beb. Renewable energy: the key
to the transition

Source: Bioresources within a Net-Zero Emissions Economy: Making a Sustainable
Approach Possible, Energy Transitions Commission

The IEA logically puts renewable energies at theforefront of transition, making their massive
development one of the key milestones of40

41

the NZE. The IEA states that “solar PV andwind lead the way, thanks to low costs,
widespread availability and policy support […]their capacity more than triples over the next
decade, which is nearly enough to meet allelectricity demand growth to 2030”, and theirshare of generation rises from under 10% in2020 to nearly 30% in 2030 (see G.18).

The IEA has a long track record ofunderestimating
renewableenergydevelopment. While the IEA projects anannual growth of solar power of 21% from2020 to 2030, this then slows down so that
overall average growth from 2020 to 2050 isonly 11%. Similarly for wind energy, NZE shows
annual growth of 17% in the current decade
but only 9.6% annual growth over the period
to 2050. This slowdown in renewable energy
buildup after 2030 appears totally unjustified.
It could be explained by the relatively
limited place of electricity – which makes up
49% of total energy consumption in 2050
compared to 70% in the Energy Transition
Commission work - the aforementioned betson CCS (see part 2.a) and biomass (see part2.c), and the development of nuclear energy(see part 3.b). Together these limit renewable
development for electricity generation, heatgeneration and the production of “green”
gases.

Concretely, in the NZE (see G19):• Solar and wind power supply rises from
10.4 EJ64 in 2020 to 60.5 EJ in 203065 and190 EJ in 2050. Solar power capacity ismultiplied by almost six from 2020 to2030 and wind power capacity by five.
• Hydropower slightly increases from 2020
to 203066 (+ 35%) and continues to rise tonearly double by 2050 to reach 30.5 EJ.67• Other renewables - geothermal, andmarine (tide and wave) energy forelectricity and heat generation – alsosignificantly increase. It triples from 2020
to 2030 – from 4,5 to 13,2 EJ – and reach
31,8 EJ by 2050.

It is worth noting that global and regional
renewable energy potential largely exceed
the energy demand (see D2), meaning 100%
renewable energy is doable. Several scenarios
already opt for such pathways,68 for example:

While the projected increase in solar andwind capacity is massive (see G19), it relies
on several assumptions that limit renewableenergy deployment.

• The “One Earth Climate Model” features
global 100% renewable energy pathways

G18. Key indicators of energy system change by scenario

Source: Reclaim Finance based on data from WEO 2021

(see Box - The One Earth Climate Model(OECM) sectoral pathways).

phased out by 2030 and net-zero GHG
emissions between 2040 and 2050.
The scenario reaches 100% renewableenergy by 2040.

• Climate Analytics’ 1.5°C pathway explorer
provides 100% renewable trajectories for
40 countries worldwide.

• Several national roadmaps for 100%
renewable energy have been proposedby the World Future Council, UTS andpartners. Notably for Bangladesh, Costa
Rica and Tanzania.

• For Europe:• The LUT University and Solar Power
Europe provided 100% renewable
scenarios for Europe, including a
scenario enabling a fossil fuel phase-out
by 2040.69• Negawatt proposes a 96% renewable
pathway for France70 and RTE proposes
several transition scenarios including a
100% renewable scenario.71• The “Paris Agreement Compatible
Scenarios for Energy Infrastructure”(PACS) from CAN, EEB, RGI and REN21
aim at reducing greenhouse gas
emissions by 65% by 2030, reachingnet-zero greenhouse gas emissions
by 2040 with 100% renewables in all
sectors.

Source: WEO 2021, IEA

42

These scenarios require greater efforts to
reduce global energy consumption but theirscope and the assumptions underpinningthem vary drastically. For example: Negawatt’s
scenario for France divides primary energy
consumption by three by 2050, focusing
on energy efficiency and conservation as
well as renewable energy development,72
and integrates detailed modelling on theland sector73 while RTE looks solely at theenergy sector, with energy efficiency andconservation reducing by 34% electricity
consumption in 2050.74 While conservation
ultimately depends on a choice between• Climate Analytics developed 1.5°C
pathways for the EU and 9 Member
states with a GHG emissions reduction
target of between 61-74% below 1990
levels by 2030, a share of renewable
power generation in 2030 of between
76-90% and of unabated fossil gas in
the power sector of between 3-8%, coal43

different models of society75 it is clear thatthe energy transition requires unprecedented progress on energy efficiency
as highlighted by the IEA in its Energy
Efficiency 2021 report. Today, much of theenergy produced - an estimated 54% of
the UK electricity supply and 66% of theelectricity generated in the US - is lost before
being consumed due to the inadequacy of
distribution networks. Improving the network
could therefore significantly reduce the needfor new power production infrastructures.

2030, whereas these costs have fallen bymuch more in recent years.76 In the US, the
IEA uses a levelized cost of energy (LCOE) of
solar PV of $50/MWh in 2020, $30 in 2030 and$20 in 2050 while Lazard already situate solar
LCOE between $28 and $41/MWh in 202177(see G20). Similarly, the IEA’s 2020 LCOE for
US offshore wind reaches $115/MWh, 28%
higher than Lazard’s median estimate ($83/
MWh)78(see G20). The high assumptions
on the cost of renewables (and batteries)
notably contributed to raising the projected
cost of the “low CCS”, “low nuclear”79 and“low biomass” cases featured in the IEA NZEreport by undermining the competitivenessof these technologies compared to fossilbased alternatives – even retrofitted withcostly and uncertain CCS – or nuclear energy.
Grant and al. found that low-cost renewableenergies would significantly erode the valueof CCS, making it uneconomic in the power
sector and for hydrogen production. Withsolar power and batteries diminishing byrespectively 72 and 80% from 2020 to 2030,

In the last WEO, the IEA underlined thatworld’s best solar power schemes now offerthe “cheapest electricity in history”. However,the IEA has repeatedly been criticized overmany years for repeatedly underestimating
the rate at which renewable costs havedeclined. It seems to have repeated this error
in NZE with cost assumptions that undermine
renewable energy development: the costs ofsolar and batteries fall at only 5% a year from2020 to 2030, and then 1-2% a year after

D2. Regional renewable energy potential compared
to projected energy demand in 2050

on parts of today’s energy system, sparking
sharp price rises in natural gas, coal andelectricity markets”. While renewable energies
actually contributed to protect consumers
from higher energy prices, the rise of energy
bills is directly linked to higher competition forfossil fuel energy and constrained supply.83

RethinkX underlines that reaching a 100%
renewable US power system by 2030 is thecheapest option and make further investment
in coal, gas or nuclear unviable. These findings
are corroborated by Australia’s national
science agency - CSIRO - that estimates
renewables are far cheaper than alternatives
after allowing for integration costs of storage,transmission and grid services.

The WEO 2021 shows that, in advanced
economies, overall energy bills are on average
nearly 10% lower in the NZE than in the
STEPS in 2050. In emerging market anddeveloping economies, the total householdenergy bill is lower in the NZE than in the
STEPS in 2030 (see G21) and ends up broadly
the same in the two scenarios by 2050.
Households no longer need to pay for “natural
gas for heating and oil for cars”.

It is worth noting that – even following the
IEA’s cost assumptions - solar and onshore
wind energy already produce cheaper
electricity than fossil fuel or nuclear and that
this gap will increase in the coming years
in all scenarios. The IEA itself writes that“low technology costs and the availability of
low-cost financing in many markets meansthat policy makers could establish enabling
conditions in which up to 60% of theadditional generation of solar and wind in
the NZE could be achieved at no additional
cost to consumers”.

Taking stock of the current energy pricesituation, the IEA also modelled the impact ofa fossil fuel price shock in 2030 on householdenergy bills in the STEPS and NZE.84 It
found that, in the NZE, the additional costto households in advanced economies85 isnearly 40% less than in the STEPS, and in
emerging market and developing economies
it is 20% lower (see G22). The IEA explainsthat “the impact of higher commodity prices

The IEA has emphasized that the late 2021
energy price spike is not caused by theincreasing role of renewables in the energy
mix but is rather the consequence of a rapid
economic recovery “putting major strains

G20. Unsubsidized LCOE for wind and solar power - 2009-2021

Source: Fossil fuel exit strategy, Sven Tesk and Sarah Niklas

Source: Levelized cost of energy analysis V.15, Lazard

44

45

Box 8 – Critical minerals: no crisis in sight

G21. Average household energy bills by fuel in the Stated Policies
and Net Zero Emissions by 2050 scenarios

The IEA stresses that “higher or more volatile prices for critical minerals could
make global progress towards a clean energy future slower or more costly” andindicates that recent price rallies80 for critical minerals “could make solar panels,
wind turbines, EV batteries and grid lines 5-15% more expensive”. According to
the NZE, the prices will be determined by how industry and governments invest in
new supply and how consumers respond to rising prices
In its report devoted to critical minerals, the IEA clearly acknowledges that theworld has ample critical mineral reserves.81 For example, the IEA notes that wehave 170 times as much lithium reserves as annual demand and that our lithium
reserves have increased by 42% over the last eight years as higher prices and theprospect of rising demand have drawn out new investment.
If the IEA rightfully stresses that a clean energy system will require much morecritical minerals than a fossil-based system, it forgets to underline that it will
massively reduce the need for other materials to be extracted. According to
Carbon Tracker, demand for fossil fuels in 2019 was over 13,000 million tonnes(mt), and global demand for critical minerals in the renewable sector in 2020 was
7 mt. Under the IEA’s NZE scenario, demand for critical minerals in the renewablesector will rise to 40 mt in 2050. The fossil-fuel system requires 325 times morematerial than its NZE alternative.
While the rise in critical mineral demand should be monitored and be anticipated,
it can be overcome by major investments in their exploitation and will significantly
contribute to lowering other mining and drilling operations. Furthermore, criticalminerals can and should be recycled82 to lower production needs and theirenvironmental impacts and initiatives should be taken to prioritize the use ofcritical minerals and avoid inefficient uses. If the supply were to be limited at somepoint, the IEA itself notes that unlike for oil and gas - where a supply shortage canimmediately lead to price spikes and shortage for consumers - “a shortage or spikein the price of a mineral affects only the supply of new EVs or solar plants”.

Source: WEO 2021, IEA

costs to consumers in the NZE below the levelof costs in the STEPS without a price shock.

is dampened by more rapid efficiency gains,by reduced direct use of oil and gas, andby electricity having a higher share in total
household energy expenditure”. In advanced
economies, the price shock still leaves total

An analysis from Polish think-tank Instrat,
indicates that switching from coal toG22. Impact of a commodity price shock on average householdenergy bills in 2030 by scenario

Mineral requirements for clean energy technologies by scenario

Source: WEO 2021, IEA
Source: WEO 2021, IEA

46

47

Apart from generating major concerns
around the disposal of radioactive waste andpotential incidents,86 the IEA’s reliance on
nuclear energy could be risky for the overall
transition for several reasons:renewable energies would allow Polishhouseholds to save €100-170 a year by 2030.
The Instrat scenario does not rely on moregas plants that those already operating or
under construction in Poland, thus improving
the country’s energy security and covering allof its electricity needs with renewable energy
only almost 50% of the time.

Wo r l d N u c l e a r I n d u s t r y S t a t u s R e p o r t | 2 0 2 1

G24. Average annual construction times in the world

Figure 8 · Average Annual Construction Times in the World

Average Annual Durations from Construction Start to Grid Connection• Building new nuclear reactors takes many
years, and often considerably more timethan initially planned.

c. Nuclear at a crossroads• In its 1.5°C special report, the IPCC
points to the fact that “the current timelag between the decision date and thecommissioning of plants is observed tobe 10-19 years”. In recent years, a large
majority of nuclear plants took morethan eight years since their construction
start to be connected to the energy grid(see G24). This means that a major shift
to nuclear power would imply that manyof the current fossil-fueled power plants
would stay in operation (with their lifetime
possibly extended) during the long reactor
development period, making it impossible
to achieve climate targets.

The NZE features a significant increase innuclear power capacity, especially in emerging
markets and developing economies. Nuclear
provides 41.4 EJ in 2030 - a 41% increase
compared to current levels - and reaches 60.6
EJ in 2050 (see G23).
Much of the increase up to 2030 is due to thenearly 60 GW of capacity under construction
at the start of 2021. Beyond 2030, there areover 100 GW of planned projects that have notentered the construction phase and higher
uncertainty for already ageing reactors. By
2040, about three-quarters of the current
nuclear fleet in advanced economies will
exceed 50 years of operations, thus leading
to a wave of retirements. The IEA also sees
prospects for technologies such as small
modular reactors, though it underlines theneed to accelerate innovation in the area.

Duration in Years

by Grid Connection Date, from 1954 to 1 July 2021
16
Number of Reactors

1

5

10

20

14
12

30

10

10

8

8

6

6

4

4
2

2
© WNISR - Mycle Schneider Consulting
1954

1960

1965

1970

1975

1980

1985

1990

1995

2000

2005

2010

2015

2020 7/21

Source: World Nuclear Industry Status Report 2021
Sources: WNISR, with IAEA-PRIS, 2021

Wo r l d N u c l e a r I n d u s t r y S t a t u s R e p o r t | 2 0 2 1

G25. The declining costs of renewables vs. traditional power sources
Figure 44 · The Declining Costs of Renewables vs. Traditional Power Sources• Over the years, nuclear has proven to be an
expensive energy source that fails to keep
up with cost reductions for renewables andmay require massive unexpected public
spending in the coming years. According
to the World Nuclear Report 2021, andSelected Historical Mean Costs by Technology
LCOE values in US$/MWh *350
Nuclear: 123 → 163

300

Coal: 111 → 112

250

Gas - Combined Cycle: 83 → 59
Wind: 135 → 41
Solar PV-Crystalline: 359 → 37200

G23. Nuclear power capacity by scenario, 2020-2050

+33%

150

+1%

100
50
0
2009
3.0

–29%
–70%
–90%

© WNISR - Mycle Schneider Consulting

2010
4.0

2011
5.0

2012
6.0

2013 2014 2015
7.0
8.0
9.0
Lazard LCOE Versions

2016
10.0

2017
11.0

2018
12.0

2019
13.0

2020
14.0

* Reflects total decrease in mean LCOE since Lazard's LCOE VERSION 3.0 in 2009.

Source: Lazard Estimates, 2020

1242

Notes
LCOE=Levelized Cost of Energy*This graph reflects the average of unsubsidized high and low LCOE range for a given version of LCOE study. It primarily relates to the North American
renewable energy landscape but reflects broader/global cost declines.

Source: World Nuclear Industry Status Report 2021
Source: WEO 2021, IEA

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Box 9 – Fossil fuel subsidies still going strong

IMF - Global fossil fuel subsidies over time

The increasing competitiveness of renewables energies and the benefits ofdeveloping these clean energies for consumers should be compared to thecontinued high level of financial and policy support governments devote to fossil
fuels. The IEA underlines that fossil fuel consumption subsidies are bouncing
back - after a sharp decline due to the slow down of economic activities in 2020
– to reach a projected $440 billion in 2021.
The Production Gap Report also underlines that G20 countries have directed“around $300 billion in new funds towards fossil fuel activities since the beginningof the COVID-19 pandemic — more than they have toward clean energy”.
IRENA underlines that in 2017 “the costs of unpriced externalities and the direct
subsidies for fossil fuels” reached $3.1 trillion, including $447 billion in direct
fossil fuel subsidies, compared to $128 billion for renewable power generation.
These subsidies are only the tip of the iceberg when it comes to total public
support to fossil fuels – the IMF estimates global fossil fuel subsidies rose to $5.9
billion in 2020. They significantly contribute to increasing the competitiveness offossil fuels compared to renewable energies.
Fossil fuel advocates are quick to argue that massive renewable energy
development requires significant subsidies and public support. While this is only
partially true, with a large share of renewable energy deployment being alreadycost effective – as shown by Energy Watch for the German power system - a major
step in the right direction can be achieved by shifting public subsidies away fromfossil fuels and toward clean alternatives. In fact, with the rebalancing of energy
subsidies from fossil fuel to renewable energies, IRENA estimates that global
fossil fuel subsidies could be 45% lower in 2050 than without any change tocurrent plans and policies.

Source: Still Not Getting Energy Prices Right: A Global and Country Update of Fossil Fuel Subsidies, IMF

IRENA - Total energy sector subsidies by fuel/source
and the climate and health costs, 2017

IEA - Global fossil fuel consumption subsidies, 2010-2021

Source: Energy subsidies, IRENA
Source: WEO 2021, IEA

50

51

based on data from Lazard (see G25), overthe past decade levelized cost estimatesfor nuclear energy in the US increased
by 33%, while costs for utility scalesolar and wind dropped by respectively
90 percent and 70%.87 The IEA WEO
2021 cost estimates themselves show
an average cost of nuclear power wellabove the cost of renewable energies(see G26). Furthermore, in recent years,
costs have soared for EPRs, the mostrecent generation of nuclear reactors.
The French Court of Accounts slammed
the lack of government oversight of
the Flamanville-3 EPR construction
project, which is at least ten years behindschedule and recalculated the cost atover €19.1 billion.88 Furthermore, nuclear
cost estimates often fail to consider thegrowing cost of nuclear waste disposal
and decommissioning.

with regard to the commercial side”. The
2021 version of the report indicates that“the evidence so far suggests that thesmaller reactor projects may suffer frommany similar challenges as large nuclear
reactors and maybe from some new ones”
and underlines that “the amplification of
the talk about SMRs and related media
coverage over the past year is not reflectedby any major industrial achievementson the ground”. In fact, according to thereport, “SMRs, like large reactors, willcontinue to be subject to delays and cost
overruns, and the high likelihood that theywould not be economical even under themost favorable circumstances”.

“

Nuclear is neither clean, safeor smart; but a very complex
technology with the potential
to cause significant harm”

Dr Greg Jaczko and several
colleagues in a statement• Nuclear
reactorsarepotentiallyvulnerable to climate change. Climatechange – by affecting cooling systems
or generating damages through extreme
weather events – can require the
shutdown of nuclear reactors. Climaterelated unavailabilities reduced electricity
production from French nuclear reactors
by 1.4 Twh annually in the past six years
and 3 Twh in 2020.

• The World Nuclear Report 2020 underlinedthat small modular reactors (SMRs) — often
presented as a key area of developmentby the industry — show “few signs thatwould hint at a major breakthrough […]either with regard to the technology orG26. IEA 2050 forecasted cost of electricity from nuclear
Wo r l d N u c l e a r I n d u s t r y S t a t u s andR e p o r trenewables,| 2021LCOE (US%/MWh)Figure 45 · IEA 2050 Forecasted Cost of Electricity from Nuclear and Renewables, LCOE (US$/MWh)

2050 Forecasted Average Cost of Electricity from Nuclear and Renewables
in US$/MWh
104
99

-6%

-7%

-46%
46
45

2020

-11%

-14%
-66%

–39%

–58%

2030

2050

Nuclear: 99 → 92
Onshore Wind 46 → 40
Offshore Wind 104 → 35
Solar: 45 → 19
© WNISR - Mycle Schneider Consulting

Source: World Nuclear Industry Status Report 2021

52

Source: IEA, 2021

53

CONCLUSION
After WEO 2021

W

ith its WEO 2021, the IEA sends a strong signal to political leaders, companies
and financial institutions. By prioritizing 1.5°C and acknowledging the need to
immediately put an end to new fossil fuel supply and thermal coal projects, theagency makes decisive progress in addressing the climate crisis and sets a new climateaware norm for the political, economic and financial world to follow. Getting in line with
the NZE will require a massive transformation of companies in many sectors, with only
3% of the 4400 companies analyzed by Moody’s having targets aligned with this 1.5°C
scenario and oil and gas companies aiming at 3°C.

“

The next three years will
determine the course of thenext 30 years and beyond.

”Fatih Birol,
Executive director of the IEA,
June 2020

The European Union’s commitment to push “for oil, coal and gas to stay in the ground,including in Arctic regions” is a first step in the right direction. Taking stock of the IEA’s
conclusions, the EU Commission aims “not to allow any further hydrocarbon reserve
development in the Arctic or contiguous regions, nor to purchase such hydrocarbons if
they were to be produced”. However, many political leaders, companies and financial
institutions have already proved reluctant to follow the IEA’s call to end fossil fueldevelopment. Companies and financial institutions have also strived to find ways toaccept the IEA’s conclusions while simultaneously opening doors to keep on developing
oil and gas, as the recent oil and gas alignment framework from the investor group IIGCC
exemplifies. With the WEO 2021, they have no excuse left not to act.
Of course, the IEA still falls short of charting a truly sustainable path to fulfill the 1.5°C
goal of the Paris Agreement. Old habits die hard, and the IEA still massively relies on
CCUS, CDR and biomass, while betting on significant nuclear growth. The IEA itself
identified its reliance on such technologies as risky, notably stressing that failing to reach
the NZE milestones on CCUS, hydrogen and electrification could bar it from reaching its
carbon neutrality goal. The One Earth Climate Model provides an alternative to the NZE
for those that want to adopt a precautionary approach to these uncertain and costly
technologies (see Box 10 - The One Earth Climate Model (OECM) sectoral pathways).
Furthermore, the NZE scenario does not yet provide the regional-level data by sector
that is available for the three other WEO scenarios. If we believe this is largely due
to time constraints, the IEA should swiftly disclose these data to allow actors to fully
leverage the NZE.
While the WEO 2021 marks a turning point for the energy sector and the IEA, muchremains to be done to get on track to meet the 1.5°C objective of the Paris Agreement.
On one hand, political leaders, companies, and financial players must stop fighting themain conclusions of the NZE and follow them. On the other, the IEA must continue its
work to provide a sustainable and low risk pathway to reach 1.5°C.

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Box 10 – The One Earth Climate Model (OECM) sectoral
pathwaysBox 11 – Eternal growth in a world without a climate
crisis?

The One Earth Climate Model (OECM) from the Institute for Sustainable Futures (ISF) at
the University of Technology Sydney (UTS) proposes 1.5°C pathways for 12 industries,
including energy utilities and fossil fuel companies, with disaggregated scope 1, 2
and 3 emissions and regional breakdowns. The latest OECM research methodology,
assumptions and data will be published late 2021 or early 2022 and the full datasets
will be made available as open source.

When it comes to hypothesizing future growth, the IEA scenarios are constructedusing analysis from the International Monetary Fund (IMF) and Oxford Universitythat feature significant and continued global economic growth from 2020 to 2050.
Indeed, during this period, global GDP will supposedly grow by an average 3% per
year. Following this trend, reaching “net zero” emissions by 2050 requires a massive
drop of the carbon intensity of GDP: by 56% from 2020 to 2030 and 91% from 2020
to 2040.

The OECM scenario stays within a 400 GtCO2 carbon budget for energy-related
emissions, 60 Gt less than the IEA’s NZE. It is based on a “IPCC P1” scenario, whereafforestation is the only CDR option considered and neither fossil fuels with CCS nor
BECCS are used. Therefore, only 5 GtCO2 would be removed by 2050 and 86 by 2100
thanks to nature-based sinks in the OECM. This should be compared to the almost
120 Gt CO2 removed through carbon capture (89.5 Gt from CCUS and BECCS and 29.4
from DACCS) and 40 GtCO2 removed with land-use changes in the NZE until 2050.
In the OECM, investment in fossil power plants ends after 2030 and coal power plants
are phased-out between 2030 and 2035 in Europe and North America. Electricity
accounts for 65% of total energy consumption in 2050, with a 206% increase from2020 to 2050. While electricity makes up for a higher share of consumption in the
OECM than in the NZE in 205089 total power generation remains lower, showing that
the OECM relies more on energy efficiency and lower energy consumption while stillrequiring a massive development of solar and wind power.

The close link between economic growth and energy use is largely ignored and,depending on the scenario, energy consumption will continue to grow, stagnate, ordecrease and energy prices will rise or diminish with no impact on growth projections.
This characteristic reinforces the need to focus on energy efficiency and measures toreduce energy consumption.
Beyond this, one can question the reality of growth conceptualized as infinite, without
considering planetary limits. The consequences of global warming and environmental
degradation are excluded from the economic analysis.

The OECM also requires a swift and major reduction of global fossil fuel production:“new fossil fuel projects cannot go ahead” and “existing oil and gas fields and coalmines are phased out at an average annual decrease rate of at least 8.5%, 3.5% and9.5% respectively”. To replace fossil fuels, biomass plays a lesser role than in the
NZE, with “sustainable biomass” producing 85 EJ per year in 2050. The OECM notesthat companies and financial institutions should set and implement 1.5°C no/low
overshoot alignment strategies and immediately stop new oil, coal and gas projects.

Global scope 1, 2 and 3 emissions for the primaryand secondary energy industry

Source: OECM

56

57

ANNEXREFERENCES

Financial institutions relying on the IEA’s SDS

1. The NZE explicitly requires the end to new unabated coal power plants projects. The end to new unabated
gas is derived from the NZE objective to reach carbon neutrality by 2035 in advanced economies and 2040
worldwide and of the sharp drop in electricity produced from fossil gas.
2. LNG projects not approved by the end of 2021. The IEA underlines that a large share of the LNG
projects currently planned are not needed. Furthermore, many of these projects will transport gas fromunconventional sources whose exploitation generates high methane emissions incompatible with the IEA’s
methane target.
3. Renewable energies, energy efficiency and energy storage solutions are to be prioritized.
4. The work of the IEA’s own Coal Industry Advisory Board (CIAB) has been largely focused on promoting CCS
with coal since the signature of the Paris Agreement.
5. The NZE leads to energy-related emissions reaching 460 GtCO2 between 2020 and 2050 while the IPCC
indicates that to limit global warming to 1.5°C with a 50% chance the carbon budget would be 500 Gt and
400 Gt with a 67% chance.
6. The IEA estimates that “a quarter of energy employment is tied to supply chains that may be located in othercountries, particularly in the case of solar PV, wind, batteries, grid components and vehicle components”.
IRENA estimates that renewable energy already created 12 million jobs globally.
7. The IEA estimates air pollution causes over 5 million premature deaths a year today. Coal has been known
to be one of the main contributors to air pollution worldwide for years and reducing its use in power plants
alone would significantly improve the health of a billion people worldwide as shown by Dan Tong and al.
8. The IEA specify that “just under half of households gaining access to electricity do so with a grid connection,
while mini‐grid and stand‐alone systems account for 30% and 25% of new connections respectively”.
These solutions largely rely on renewables in the short term: “over 90% of off‐grid and around 70% of grid
solutions deployed between now and 2030 are sourced from renewables”.
9. Estimates from Reclaim Finance based on data from Rystad Energy and emission calculation method from
Kjell Kühne, Energy Research & Social Science, Volume 79, September 2021.
10. See: Bill Hare and al, Why gas is the new coal, 2021, Climate Analytics
11. The IEA also notes that “any LNG projects with a break-even price of more than USD 5 per million British
thermal units (MBtu) would be at risk of failing to recoup their investment costs in this scenario.”
12. The graphic uses data from the WEO 2020 for SDS and STEPS.
13. See: Bill Hare and al, Why gas is the new coal, 2021, Climate Analytics.
14. The IEA defines advanced economies as “OECD regional grouping and Bulgaria, Croatia, Cyprus, Malta andRomania”. Emerging market and developing economies are “all other countries not included in the advanced
economies regional grouping”.
15. The RESET project provides an analysis of the environmental impacts of various energy techniques for the
power sector. It notably shows that renewable energies – including wind, solar, and geothermal - have thehighest sustainability potential. The references it provides could help to chart the path for a carbon neutral
power sector by 2040.
16. The IEA indicates that “Approvals of new coal-fired plants have slowed dramatically in recent years,
stemmed by lower cost renewable energy alternatives, rising awareness of environmental risks, andincreasingly scarce options for financing. Yet some 140 GW of new coal plants are currently underconstruction and more than 400 GW are at various stages of planning.”
17. According to the IEA, meeting the goals of the NZE requires annual retirements averaging over 90 GW from2021 to 2030.
18. In the NZE, there is still some residual coal by 2050. Global coal use drops by 90% from 2020 to 2050, andaround 80% of remaining coal use is in facilities equipped with CCUS by 2050. The IEA devoted a specificreport to the coal phase-out.
19. The production of electricity by unabated gas plants diminishes by 95% from 2020 to 2050.
20. The IEA stresses four ways to ensure the flexibility of the power system: power plants, storage technologies,
demand side response and electricity networks.
21. Carbon Tracker compared the fossil fuel production and investment plans from oil and gas companies tothe requirements of the NZE and other IEA scenarios. It notably concluded that the production from thesecompanies would need to shrink in an NZE scenario, while they currently plan investments that would beincompatible with all IEA scenarios.
22. The IEA published a report highlighting the solutions to reach this objective.
23. The IEA indicates that “on average, we estimate that 8% of natural gas and natural gas liquids entering flares
are not combusted and leak into the atmosphere. This is more than double previous estimates, and suggeststhat flaring resulted in more than 500 Mt CO2-eq GHG emissions in 2020, which is more than the annual CO2
emissions from all cars in the European Union”.
24. See for example: Joannes D. Maasakkers et al., “2010–2015 North American methane emissions, sectoralM

any in the financial sector have used
the IEA’s work to justify their fossil
fuel production plans or – for financial
players - their support to companies drillingand digging new wells and mines. In recent
years many have relied on the IEA’s Sustainable
Development Scenario (SDS) that does not
aim at limiting global warming to 1.5°C90 andis disqualified as a “climate” scenario in the
IEA’s WEO 2021. If their confidence in this
scenario was genuine at the time, they haveno choice but to take onboard the IEA’s key
conclusions resulting from the NZE.

BNP Paribas

A few cases of financial institutions explicitly
relying on the SDS or other IEA scenarios todefine their strategy are given below.91

JPMorgan Chase

BNP Paribas uses the IEA SDS as part ofits Paris Agreement Capital Transition
Assessment (PACTA) alignment work. The
bank mentions that its coal exit deadline isaligned with the SDS and that its commitment
to reduce its exposure to oil and gas upstream
activities is “more ambitious” than the SDS.
It also compares the carbon intensity of its
portfolios to the SDS, effectively using it asa benchmark for aligning its energy activities
with the Paris Agreement.

JPMorgan Chase has developed its own
alignment tool “Carbon Compass” to“measure and track progress” against its
climate targets. The bank indicates that its
targets “are based on credible third-party
energy and emissions scenarios, such as theInternational Energy Agency’s Sustainable
Development Scenario (IEA SDS) and theEnergy Technology Perspectives Beyond
2°C Scenario (ETP B2DS)”. The bank clearlymentions the IEA SDS on its website as themain source of transition pathways for its
Carbon Compass tool.

Société Générale
In its Climate Strategy, published in October
2020, Société Générale commits to “proactively aligning our financing portfolios with
the IEA Sustainable Development Scenario(SDS)”. The bank underlines that “alignment
efforts must draw on benchmark climate
scenarios and robust methodologies formeasurement” and that the SDS fulfills theserequirements. It also compared a reductionof the exposure of its portfolio to oil and gas
extraction by 10% by 2025 to the trajectory of
the SDS.

ING
In its “climate alignment” report, ING comparesto the SDS various indicators related to its
financial services to the energy supply sector.
The bank emphasizes that its commitment
is “calibrated to the SDS” and that “if the SDS
transition pathway requires a greater decline
in oil and gas production, at a faster rate,that scenario will guide the direction that
ING will take”. It indicates several times thatit makes “progress in supporting our clients’and the sector’s energy transition towards
the carbon intensity milestones that mark theenergy transition pathway set out by the IEA’s
Sustainable Development Scenario (SDS)”.

Crédit Agricole
The French institution indicates that the SDS
is the “scenario used at Group level to set themain axes” its strategy to align with the Paris
Agreement. It compared its “energy mix” tothe one of the SDS, noting that for several of
its activities it “outperforms the energy mixof the International Energy Agency’s (IEA)
Development Scenario (SDS) 2020 projected
in 2040 for fossil fuels”.

58

59

contributions, and trends: a high-resolution inversion of GOSAT observations of atmospheric methane”, 2021,
Atmos. Chem. Phys.; Robert Mc Sweeney, “Methane emissions from fossil fuels ‘severely underestimated”,
2020, Carbon Brief; Aaron Clark, Glencore’s Australian mines revealed as super emitters, 2021, Bloomberg.
25. See for example: NASA Jet Propulsion Laboratory, “Study Identifies Methane ‘Super-Emitters’ in Largest US
Oilfield”, 2021, NASA; A. Clark and al, “Gazprom admits to massive methane leaks”, 2021, Bloomberg.
26. The IEA notably identifies the decline in unconventional gas production as one of the drivers of the gas
production contraction in the NZE.
27. The Production Gap Report takes into account significant carbon removal levels (see box – The Production
and coal gaps).
28. From both unabated and abated coal.
29. From both abated and unabated gas.
30. See: Bill Hare and al, Why gas is the new coal, 2021, Climate Analytics.
31. See: Bill Hare and al, Why gas is the new coal, 2021, Climate Analytics.
32. Solar and wind account for 198 EJ in 2050 while the global energy supply reaches 543 EJ.
33. See appendix B of the Production Gap Report for more detail. The Production Gap Report does not put any
specific limitation on potential for CCUS or DAC.
34. The sustainable range for BECCS is estimated to be 0.5-5 GtCO2 and for afforestation 0.5 to 3.6 GtCO2. The
Production Gap Report refers to the Climate Action Tracker to justify its thresholds.
35. Country and company pledges relying on the UK’s Powering Past Coal Alliance (PPCA) are not fully alignedwith the Paris Agreement and can hide dangerous policies that prolong the use of coal worldwide, as
explained in Reclaim Finance’s report published in April 2021.
36. The IEA describes three types of CO2 removals:
1. Captured and stored emissions from the combustion of bioenergy and renewable wastes.
2. Captured and stored process emissions from biofuels production.
3. Captured and stored CO2 from the atmosphere, which is reported as direct air capture (DAC).
The first two can be reported as BECCS. For more information on carbon removal and utilization methods,
read the study “The technological and economic prospects for CO2 utilization and removal” in Nature.
37. 1186 Mt come from “industry removals” made of 553 Mt from biofuel production and 633 Mt from direct air
capture. The remaining 748 come from bioenergy and waste.
38. The IEA indicated that “Total CO2 captured includes the carbon dioxide captured from CCUS facilities (suchas electricity generation or industry) and atmospheric CO2 captured through direct air capture, but excludes
that captured and used for urea production”.
39. 40 Mt of CO2 are captured by existing and currently in construction CCS projects.
40. In this case, a much faster build-up of renewable energy capacity and renewable hydrogen production isneeded, at a higher overall cost. As the NZE has been designed to “minimize stranded assets”, the IEA notedthat limited CCS deployment could in return lead to $90 billion of coal and gas plants becoming stranded in
2030 and up to $400 billion in 2050.
41. The IEA writes that: “After 2030, end-use sectors decarbonise in the NZE by switching to the use ofelectricity, hydrogen-based fuels, CCUS in industry, or advanced bioenergy. CCUS is critical to addressing
process emissions from cement, natural gas-based hydrogen and biofuel production, for the production ofsynthetic fuels, and to reach negative emissions from bioenergy with carbon capture and storage and direct
air capture with storage. In the electricity sector, most of the heavy lifting is done by renewables in the NZE,
but bioenergy, CCUS and hydrogen-based fuels play a critical role in providing low-emissions dispatchable
capacity and delivering negative emissions when CCUS is combined with bioenergy.”
42. For elements on prioritization of hydrogen uses, see the study 12 insights on Hydrogen by Agora
Energiewende and the ”Clean hydrogen ladder” from Micheal Liebreich.
43. See for examples the Barendrecht CO2 storage, the Petra Nova plant and San Juan coal plant.
44. S. Garcia Freites and al, A Review of the Role of Fossil Fuel Based Carbon Capture and Storage in the Energy
System, 2021
45. N. Grant and al, Cost reductions in renewables can substantially erode the value of carbon capture andstorage in mitigation pathways, 2021, One Earth
46. Data from the Global Status of CCS 2021 Report from the Global CCS Institute.
47. See: Tom Baxter, “It’s time to accept carbon capture has failed – here’s what we should do instead”, 2017, The
Conversation.
48. See: Greenpeace UK, Net Expectations, 2021; CAN, “Position: Carbon Capture, Storage and Utilisation”, 2021.
49. Fossil fuel investments were especially low in 2020 due to the Covid pandemic ($330 billion according to the
IEA).
50. Fatih Birol notably told the Financial Times.that ”projected investment in oil and gas was now aligned withthe changes needed to reach net zero emissions of greenhouse gases by 2050.”
51. $475 billion for upstream oil and gas and $99 billion for coal supply.
52. Many oil and gas companies are notoriously untransparent, when it comes to reporting on their expansion
plans. GOGEL therefore uses the Rystad Energy database to determine which new oil and gas assets
companies are preparing to bring into production in the near future. According to this analysis, 506 upstream
oil and gas producers are planning to add 190 billion barrels of oil equivalent (bboe) to their production

portfolios within the next one to seven years. 14 companies are responsible for over half of this enormous
expansion (see annex). The top five are: Qatar Energy (20 bboe), Gazprom (17 bboe), Saudi Aramco (15bboe), ExxonMobil (7 bboe) and Brazil’s Petrobras (7 bboe).
53. This decline rate calculated by Rystad assumes some infill drilling and continued capital investment in thoseexisting fields. Without any investment, the decline rate would be higher.
54. According to Carbon Tracker, between 2020 and 2040 the end of the development of new fossil fuel projects
required in the NZE would notably trigger a 78% reduction in shale/tight gas production and a 86% reduction
in shale/tight oil.
55. In the NZE, total energy sector capital spending increases from around 2.5% of GDP per year in recent years
to around 4.5% of GDP in 2030, before easing to 2.5% in 2050.
56. $1.2 trillion in 2014.
57. The study by Paul E. Brockway and al. quantifies the EROI for fossil fuels at 6:1 when the EROI for renewables
is often below 10:1. M. Raugei and al. estimate the EROI for solar power is between 9 and 10.
58. Traditional biomass uses still represent 24.1 EJ in 2020.
59. This data comes from the IEA NZE report and is not available in the WEO 2021.
60. 26.4% using a conservative estimate of about 1550 Mha of available cropland, close to current use.
61. Modern liquid bioenergy rises from 3.8 EJ in 2020 to 12.5 EJ in 2030.
62. Modern gaseous bioenergy rises from 2.2 EJ in 2020 to 5.4 EJ in 2030.
63. Read the deep-dive ”Biomass is promoted as a carbon neutral fuel. But is burning wood a step in the wrong
direction?” in The Guardian.
64. 4,7 EJ for solar power and 5,7 EJ for wind.
65. 32 EJ for solar power and 28,5 EJ for wind.
66. From 16,6 EJ in 2020 to 21,1 EJ in 2030.
67. The IEA does not discuss the negative social and environmental impacts of hydropower; its serious
vulnerability to climate change, including low/zero production during droughts, and the safety impacts fromincreasingly severe floods; and questions over whether reservoir hydro can be considered as “renewable” dueto the problem of reservoir sedimentation.
68. An analysis by Jacobson and al. published in 2017 evaluated the possibility of such scenarios for 139
countries.
69. The 100% renewable energy scenarios mentioned rely on very different assumptions about energy demandand consumption.
70. In this scenario, fossil fuels are nearly phased-out by 2050 in France and the last nuclear reactor closes in
2045.
71. RTE notably stress that opting out of nuclear requires a much more significant increase of renewable energy
capacity.
72. Biomass is used as renewable energy in the scenario from Negawatt. However, none of the biomass used forenergy needs comes from dedicated forestry. Similarly, biogas is not produced thanks to dedicated land but
mainly from residues and waste.
73. The Afterres scenario 2050 from Solagro - used in Negawatt‘s 2022 scenario - charts the transition of the
agricultural, forestry and food sectors.
74. RTE considers that energy conservation is largely a social choice and does not take into account significant
shifts in its reference scenarios. Conservation/efficiency is considered in a specific scenario.
75. In France, the ADEME published various transition scenarios that depend on very different assumptions
regarding social and political behavior. They range from a scenario relying on drastic changes in the way
people live to a scenario relying on major technological breakthroughs.
76. This analysis is based on the NZE report published in May by the IEA. Renewable energy has undergone a
cost revolution in recent years. According to IRENA, Solar PV module prices have fallen by around 90% since
the end of 2009, while wind turbine prices have fallen by 55-60% since 2010. Similarly, Lazard shows a sharp
decline in renewable energy costs, with declines for solar PV projects of over 10% a year in recent years. In
the US, utility-scale battery storage costs decreased nearly 70% between 2015 and 2018.
77. Unsubsidized costs for utility-scale solar PV projects.
78. The IEA also puts the LCOE of onshore wind at $35/MWh in 2020 and 2030 and $30/MWh in 2050 but
Lazard’s estimates show a cost between $26 and $50/MWh today. Lazard estimates are unsubsidized LCOE
costs.
79. It should be noted that the IEA’s cost assumptions for nuclear seems relatively low. In the US, the IEA
estimates a LCOE of $105/MWh in 2020 increasing to $110 in 2030 and 2050 while Lazard already situates
this cost between $131 and $204/MWh.
80. The IEA indicates that “Many mineral commodities started 2021 with strong price rallies, with some reaching
multiyear highs. Copper prices broke the symbolic USD 10 000/tonne barrier in May 2021, hitting an all-time
high, and nickel prices rose by 50% from pre-pandemic levels, reaching their highest level since 2012. Lithiumand cobalt prices are also resuming an upward trajectory. The recent price rallies were mainly driven by a
combination of demand recovering faster than supply, stock building activities, ultra-loose monetary policies
and expectations for strong future demand growth as a result of accelerated energy transitions”.
81. A similar conclusion is reached by the Energy Transition Commission.

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82. Proposals to develop the recycling of rare minerals were made by the Cewaste Project in the EU. See IClima‘sarticle on battery recycling more specifically.
83. For a detailed analysis of the evolution of the gas market leading to the crisis in the EU, see the Quaterly
Report on European Gas Market from the DG Energy.
84. The IEA used the highest oil, natural gas and coal prices reached in each region over the period from 2010 to2020.
85. The additional cost would be $470 in advanced economies.
86. An intense debate around the sustainability of nuclear energy as notably emerged in the EU in the context of
the EU sustainable taxonomy. The most contentious issue was the current inability to safely store radioactive
waste.
87. The IEA’s WEO cost estimates also show that the nuclear energy does not follow the cost reduction trend of
renewable energies.
88. The World Nuclear Report 2021 provides a summary of the Flamanville-3 project.
89. Total power generation will reach 53 500 TWh in the OECM and 72 000 TWh in the NZE in 2050.
90. See: Bill Hare and al., Why Gas is the new coal, 2021, Climate Analytics
91. Many other financial institutions use IEA scenarios to conduct risk analysis on their activities and are notincluded in this list.

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THE IEA’S NET-ZERO 2050

The new normal and what’s left to be done
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